Credit Scores and Committed Relationships

Jane K. Dokko, Jessica Hayes and Geng Li

No 2015-81, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper presents novel evidence on the role of credit scores in the dynamics of committed relationships. We document substantial positive assortative matching with respect to credit scores, even when controlling for other socioeconomic and demographic characteristics. As a result, individual-level differences in access to credit are largely preserved at the household level. Moreover, we find that the couples' average level of and the match quality in credit scores, measured at the time of relationship formation, are highly predictive of subsequent separations. This result arises, in part, because initial credit scores and match quality predict subsequent credit usage and financial distress, which in turn are correlated with relationship dissolution. Credit scores and match quality appear predictive of subsequent separations even beyond these credit channels, suggesting that credit scores reveal an individual's relationship skill and level of commitment. We present ancillary evidence supporting the interpretation of this skill as trustworthiness.

Keywords: Credit scores; Committed relationships; Assortative matching; Household finance; Trustworthiness (search for similar items in EconPapers)
JEL-codes: D14 G21 J12 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2015-08-19
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://dx.doi.org/10.17016/FEDS.2015.081 http://dx.doi.org/10.17016/FEDS.2015.081 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2015-81

DOI: 10.17016/FEDS.2015.081

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